Financial planning applications come in two flavors, goal-based or cash-flow-based, and neither type does a very good job of equipping advisers with ways to estimate insurance or health care costs for their clients.
Enter the Retiree Healthcare Planner, an online application quietly launched in May by Omyen Corp.
Prior to starting the company, chief executive Dinesh Sharma spent several years working at Fidelity Investments, where he was responsible for developing wealth management tools and technology, among other things.
It was there that he noted the lack of tools to help advisers with the tough discussions with clients about long-term care and other health care issues.
Mr. Sharma designed ReHP to be the solution to that problem. Using a number of inputs, it assists advisers in arriving at the type and amount of life and long-term-care insurance their clients will need as they enter retirement.
The software uses data such as the individual's age, current or past health and family health history, as well as lifestyle information (smoking habits, body type, physical-exercise level) to help an adviser project the expected cost of various health care services that may be needed in retirement. It can be used with clients as young as 40.
Various Medicare programs, choices and their premiums are also incorporated so that an adviser can quickly perform on-the-fly hypothetical calculations when working with clients.
ReHP makes use of sliders, as do many of the latest versions of planning tools, to allow for the adjustment of several fields without the need for manual input of data.
Pricing is also simple and straightforward. Advisers purchase an annual license at a rate of $60 per month per seat, allowing a subscriber to work on an unlimited number of plans.
While the application itself is a model of simplicity, advisers with whom I spoke find initiating health care conversations anything but simple. They said clients are alarmed by the skyrocketing cost of health care, nursing home stays and long-term care.
“Clients will get sticker shock at first, but then you can move beyond that,” said Katy Votava, founder of GoodCare.com, a consulting firm that caters to consumers and businesses in understanding health care services and their financing.
Ms. Votava is a registered professional nurse and has a doctorate in health economics and nursing.
She said that the strength of the software application is that it can help advisers run scenario-planning options for clients.
She said the client will look at the options and say: “Wow, I may not be able to afford 20 years of that type of insurance, but maybe I can afford 10 years.”
While she likes the application, she sees some flaws. For example, she said advisers can adjust inflation to whatever rate they want, which has its dangers since health care inflation tends to rise at 7% to 8% a year, on average.
“I'd like to see a warning flash up if they adjust that too low,” Ms. Votava said.
NOTHING LIKE IT
Jorge Soriano, a representative at USA Asset Management LLC, a registered investment advisory firm managing $40 million in assets, said he has not seen anything like ReHP on the market.
“We didn't waste a lot of time once we had heard of it,” he said. “I do the financial planning here at the firm, and I am including it with each new plan or annual review I perform.”
Just to be clear, all the data that an adviser enters about a client is not collected or shared with any third party.
“I used to rely on my own jury-rigged spreadsheets for dealing with insurance needs and long-term-care planning — the process was very linear, with one rate of inflation, and I was limited on what I could do as far as rate of return on assets,” said Jacqueline Thornhill, director of financial planning for The WealthCare Center.
“Now I have something much more customized for the task,” she said.
“There are a total of 50 simulations, which is kind of like having a set of Monte Carlo simulations for doing this type of planning,” Ms. Thornhill said, adding that baby boomers will only drive the need for such tools. “It also lets us better separate out long-term-care planning from insurance and other aspects of retirement planning.”
The only competitive alternative that approaches the depth of ReHP is a product set called the Healthcare Cost Analyzer from HealthView Services, which I wrote about when it was launched at the beginning of the year (InvestmentNews, Jan. 16).
The market potential for these products seems sizable. Consider the results of a recent Sun Life Financial Inc. survey, which found that 85% of 401 affluent individuals with at least $500,000 in investible assets have not discussed long-term care with a financial adviser. If advisers had the tools, more of these discussions might be held.
For more detailed information on the Retiree Healthcare Planner visit Omyen Corp. online.
For worksheets and other materials on the subject of healthcare planning available from Dr. Katy Votava check out the The Goodcare Toolkit online.
Email Davis Janowski at firstname.lastname@example.org